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Friday, December 14, 2012

Current sentiment picture

The NAAIM sentiment survey showed quite a jump in bulls this week.  Check out this chart.


In the last two years there was only one reading more bullish then we have today.  That was in early 2011 just as the market was about to have a small correction as can be seen in the chart.  I think it is safe to say these guys are all in now.  We can see from the chart that readings over 80 mean slow upside progress or a pullback.  Which will it be this time?  The breadth is not showing the strength that we have seen coming off other lows.  This seems like an unwarranted optimism to me, but what would I know.  The risk of a pullback is definitely higher then the risk of a big move up from here.

Here is a look at the II sentiment survey.


The bears ticked down to the lowest levels since the spring.  Neither the bulls or bears are at extreme readings based on recent history.  The number of bears has been low all year.  It is an odd year that does not have a spike up in bears at some point.  Amazing optimism given that we are facing a very poor economy.

Here is the AAII chart with the number of bulls on it.


The individual investors are the most bullish they have been since early in the year.  Are they right or wrong here?  It has not gotten over the 45 area which can kick off big moves.  This one is not real helpful at this point.

Here is a look at the latest Bespoke poll.


I find this one totally amazing really.  The poll shows consistently more bullish sentiment since the market top then the entire first part of the year when the market had a huge rally.  This is quite common in the early stages of a bear market.   

I think the NAAIM survey is a very important one at this time.  There really is very little fuel on the upside here.  If the market heads down in a serious manner there is lots of fuel for bears.  People are generally very optimistic right now.   Bullish sentiment amid a weak technical picture in the market is usually very negative for price.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.